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Despite the European Commission's pledge to continue to seek the full exchange of financial information, the Swiss Bankers Association (SBA) reported a few days ago on its website that two new agreements to resolve outstanding tax issues will enter into effect in 2013, with Germany and the United Kingdom, respectively. Indeed, over the past few months, bank secrecy and the growing public debt of several European countries have made daily headlines. Since the start of the 2008 financial crisis, bank secrecy has come under fire by both the OECD and national governments seeking increased tax revenues. This article outlines the approach to tax amnesty and bank secrecy adopted by Switzerland and Belgium, in an effort to balance public and private interests.


Switzerland has managed to maintain strict bank secrecy. In general, Switzerland exudes an aura of stability in an increasingly economically shaky European Union. This is nothing new, however. Switzerland has always had a certain reputation in financial circles, which has prompted varying reactions from EU Member States. Italy, for example, recently blamed its budgetary woes on its neighbour to the north.

On the international level, Switzerland, like Belgium, found itself in an embarrassing position after being put on the OECD's gray list of countries that had not fully implemented international tax standards. As a result of enhanced administrative cooperation and greater exchange of information between national tax authorities, two trends which have been growing steadily since 2008, Switzerland was prompted to modify its stance. The most important modification was the express acceptance by Bern of the OECD's standard for the exchange of information, i.e. exchange upon request.

As expected, the Swiss financial sector, represented by the SBA, formulated new proposals. After lengthy internal discussions, the SBA submitted to the Swiss Federal Council a proposal known as Project Rubik (named after the notoriously difficult mechanical puzzle, the Rubik's cube), in response to demands by national governments for the exchange of information and the disclosure of assets.

Fundamentally, Project Rubik is not particularly innovative. The SBA proposes that Switzerland negotiate with other countries, mainly EU Member States, to conclude bilateral agreements settling long-standing tax issues. Any such agreement should provide for three main elements:

  • a final withholding tax on future investment income and capital gains, the rate of which is to be determined in the agreement;
  • regularisation of outstanding tax liability through the payment of a flat-rate tax (similar to Belgium's tax regularisation efforts);
  • facilitated access for Swiss banks to the banking market of the other signatory state.

In 2009, it appeared unlikely that this proposal would find many adherents. In the meantime, however, many countries found themselves in dire financial straits owing to the ongoing economic downturn. This context undoubtedly enhanced the proposal's attractiveness. The agreements entered into with Germany and the United Kingdom in August of this year are illustrative in that respect.

Tax agreement with Germany of 10 August 2011

This agreement includes the three main principles of Project Rubik, namely (i) regularisation at a flat tax rate ranging from 19% to 34%, (ii) a final 26.375% withholding tax on future income and capital gains, to be withheld at source by the Swiss paying agent, and (iii) easier access for Swiss banks to the German market. The German tax authorities estimate that the regularisation is likely to generate around EUR 50 billion.

Tax agreement with the United Kingdom of 24 August 2011

This agreement contains basically the same features: (i) regularisation at a rate ranging from 20% to 34% and (ii) the application of a flat withholding tax on future income, the rate of which depends on the nature of the income, i.e. 48% for interest income, 40% for dividend income and 27% for capital gains.

Both the French and Italian authorities have reportedly also expressed interest in resolving their tax issues with Switzerland by entering into a bilateral agreement, rather than pursuing a European solution in this regard.

Nevertheless, although Project Rubik allows the repatriation of funds with relative ease during times of budgetary crisis, it risks undermining Community policy in this area, which promotes the exchange of information. This probably explains why negotiations are kept confidential and only rarely discussed.


Belgium has allowed the repatriation of funds for quite some time. Indeed, the first regularisation campaign took place in 2004 and raised almost EUR 500 million. In addition, a permanent regularisation possibility was introduced by the Act of 27 December 2005. The basic premise of regularisation is that if the taxpayers pay the tax due on the repatriated funds plus a fine, they cannot be prosecuted (either criminally or by the tax authorities) for failure to report the income in the first place.

A new regularisation project, more advantageous than the permanent one, is currently on the table. The finance minister has stated that another tax regularisation campaign could generate as much as EUR 600 million.

With respect to bank secrecy, Belgium has also made efforts to relax its rules, with the entry into force (in July) of the Act of 14 April 2011. With respect to tax matters, bank secrecy can be set aside under two circumstances.

Firstly, the tax authorities may, if certain condition are met (e.g. the taxpayer has not declared taxable income) and on their own initiative, ask a financial institution or bank to provide information about a taxpayer, albeit only after having tried to obtain the information from the taxpayer directly. If the taxpayer refuses to cooperate, the tax authorities may apply the new procedure. After having notified the taxpayer, the tax authorities will submit a request for information to the central contact point at the National Bank of Belgium, which will determine the financial institution to which the request should be referred.

Secondly, a foreign tax administration may request information about Belgian taxpayers within the framework of a bilateral tax treaty. In this case, a simplified procedure applies. It is not necessary to first request the information from the taxpayer directly or notify the taxpayer that a request for information has been made to the taxpayer's financial institution.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.